Blackberry Shareholders Hold Their Breath
June of 2008 was a golden time for Blackberry’s shareholders. Blackberry was it when it came to smart phones. The company had a market value of approximately $85 billion, and the ceiling seemed limitless. If one were living in a vacuum for the last 5 years, they would assume this week’s announcement of a $4.7 billion proposed buy-out of Blackberry by its largest shareholder, Fairfax Financial Holdings, would not be greeted with open arms by the company’s shareholders. The reality, however, is much different. The $9 a share buy-out from Fairfax could, in fact, be seen as a gift.
Blackberry’s journey to almost technological insignificance over the past five years is marked by: (1) an extraordinary expansion of the company’s competitive field; and (2) failures of the company’s board of directors. Apple, Google and Samsung saw this massive opportunity in the tech space and were determined to chip away at Blackberry’s hegemony in the market. These companies were well-funded and were implementing cutting-edge technologies. They simply eviscerated the Blackberry’s market share and made the company nearly irrelevant.
The question is why? How is it that Blackberry let this happen? Regardless of whether it was an inherent arrogance or lack of foresight, Blackberry’s board of directors is to blame for the position the company now finds itself. The performance by the company’s board of directors over the past 5 years can at best be described as incompetent and at worst, grossly negligent. The lack of emphasis on research and development over the years left open the door for their competitors. After all, Blackberry had 2 huge advantages over their competitors. First, they had (or should have had) a significant head-start in the space. Second, and more importantly, they had what their competitors wanted, the users.
The failure of Blackberry’s Board of Directors to have in position a management team which could seize upon these competitive advantages is a demonstration in failed corporate governance. It is also why Blackberry’s shareholders now find themselves holding their breath hoping this deal goes through.